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Creating competitive edge, making impact

Yara had its best year so far in 2011. Yara’s revenues and net income levels were at an all-time high, mainly reflecting higher margins. The margins’ increase was supported by healthy farming profits and by Yara’s strategy to leverage our portfolio and crop nutrition knowledge, increasing sales of premium products and to cash crop segments.

The strong fundamentals in the agricultural markets are underscored by the FAO’s Food Price Index, which on average was at a higher level in 2011 than in 2008, the year of the food price crisis. The increased margins more than offset a slight reduction in total volumes and increased energy prices.

“Volumes shall increase by 8 million tons by 2016.”

Jørgen Ole Haslestad, President and CEO

In 2011, I updated Yara’s strategic growth goal. Volumes shall increase by 8 million tons by 2016, about a 40 percent increase of our total volumes. This ambitious target will be reached through a combination of growth initiatives. Optimization of production processes, step growth and Brownfield and Greenfield expansions will all be taken into consideration.

Last year, several expansions were finalized or ongoing. The Qafco 5 and 6 expansions come into production during 2012. Our Dutch plant, Sluiskil, finalized a urea expansion on schedule, under budget. This Urea 7 plant adds 500,000 tons annually, which is targeted at the value-added AdBlue/DEF market.

The Urea 7 expansion supports Yara’s ambition to grow in the US DEF market. Yara is the leading global provider of the cleansing fluid used to remove hazardous NOx emissions from diesel engines. This is a global market set to grow as nations worldwide introduce legislation to safeguard human health and reduce environmental impact from combustion processes.

Our JV in Libya, Lifeco, halted production in February 2011 following the unrest in the country. We aim to restart the plant during 2012.

Looking forward, we are exploring the opportunity to expand our Belle Plaine plant in Canada. If conditions are right, this can also be a large scale add-on to Yara’s capacity.

The fundamental factors which pull the fertilizer market, such as population growth and dietary changes, provide strong support for Yara’s fertilizer products. Assuming continued growth in global food consumption, the world needs another record grain crop in 2012 in order to prevent a further decline in inventories.

The combination of severe weather conditions, financial turmoil and price volatility in agricultural markets is likely to remain part of everyday business life. Interestingly, volatility in energy and agricultural prices became a new top-five ranked risk in the World Economic Forum (WEF) Global Risks report 2012.

Taking these global trends into consideration, Yara has renewed its approach, launching the strategic framework ‘Creating Impact’. This is a framework for identifying and exploring connections between business opportunities and benefits for society.

We recognize how business solutions and societal interests intersect. Being a front runner means identifying how mutual interest can create a sustainable competitive advantage to Yara. As an example, using our expertise on nitrogen chemistry to reduce harmful emissions has a positive impact on human health, social economics and Yara’s business.

The scope of Creating Impact is to create value for shareholders, customers, employees and society at large – while creating a sustainable competitive edge for Yara. This provides Yara with a framework for its engagement at the World Economic Forum, the G20 summits and similar high-level venues. Here, we contribute our knowledge towards global leadership on sustainable development of agriculture. Our message is that agriculture needs to improve yield levels, but this must be done sustainably. We need more crop per drop of water, using fertilizer and land areas more efficiently.

We have defined three focal areas; food, resources and environment. Within these Yara has a position and a knowledge base which provides opportunities. As a contributor to finding solutions on global food security, environmental issues and efficient use of resources, we will harvest volumes, margins and new opportunities.

Growth depends upon trust, and Yara takes pride in being a reliable partner. Doing business in about 150 countries implies being involved in markets challenged by lack of governance principles. We have chosen to adhere to a Code of Conduct which describes how we want to do business responsibly. When I assumed position as President and CEO of Yara, I strengthened efforts by establishing a Compliance and Ethics unit to intensify efforts on ethical behavior.

In 2011, Yara reported two potential cases of criminal offenses to the Norwegian National Authority for Investigation and Prosecution of Economic and Environmental Crime (Økokrim). To make sure Yara gets to the bottom of these cases, I also initiated an external investigation. I enforce a strict standard on compliance.

I want growth – sustainable growth – reflecting my belief that high social and ethical performance lead to high financial performance.